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Mar, 2011

Chartered Accountants Ireland have reviewed the Programme of the “Government for National Recovery” published by the Fine Gael and Labour parties at the weekend.  The programme contains some detail as to what can be expected in terms of tax policy.  Among the tax proposals are the following:

Page 8

Cut the 13.5% rate of VAT to 12% up to end 2013;

Halve the lower 8.5% rate of PRSI up to end 2013 on jobs paying up to €356 per week;

Abolish the Travel Tax as part of a deal with airlines to restore lost routes.  This point is further amplified on Page 13 – “We will abolish the €3 travel tax subject to a deal being agreed with Ryanair and Aer Lingus to re-open closed routes and bring more tourists into Ireland. If no deal can be done, there will be no reduction in the tax.”

Page 9

We will exempt from VAT service companies that export more than 90% of their output.

Page 10

Subject to a cost benefit analysis, we will amend the R&D tax credit regime to make it more attractive and accessible to smaller businesses, in the following ways:

Companies with R&D expenditures of under €100,000 will be entitled to full tax credit on those entire expenditures as opposed to just the increment over the base year, with marginal relief for companies with expenditure just over €100,000.

We will allow companies to offset the R&D credit against employers’ PRSI as an alternative to [an offset against] corporation tax.

To cut down on red tape in the applications process, companies in receipt of a Research, Technology and Innovation (RTI) grant from one of the development agencies will be automatically deemed as entitled to the R&D tax credit.

Page 11

We will direct the Revenue Commissioners to examine the feasibility of introducing – on a revenue neutral basis – a Single Business Tax for micro enterprises (with a turnover of less than €75,000 per annum) to replace all the existing taxes on sole traders and small businesses to cut compliance costs and make starting a business much less daunting.

Page 16

As part of our fiscal strategy the new Government will:

  • Keep the corporate tax rate at 12.5%;
  • Maintain the current rates of income tax together with bands and credits. We will not increase the top marginal rates of taxes on income. We will reduce, cap or abolish property tax reliefs and other tax shelters which benefit very high income earners. We will also ensure the implementation of a minimum effective tax rate of 30% for very high earners;
  • Consider, arising from the previous Government’s deal with the IMF, various options for a site valuation tax. Any site valuation tax must take into account the significant number of households in mortgage distress and provide local government with a reliable stream of revenue;
  • We will limit the top rate of VAT to 23%;
  • There will be no increase in the standard 10.75% rate of employers PRSI;
  • We will review the Universal Social Charge;
  • We will ensure that tax exiles make a fair contribution to the Exchequer.

Page 17

Establish a Tax and Social Welfare Commission to examine entitlements of self-employed and the elimination of disincentives to employment.  Further, on Page 52 – “In particular, it will examine family and child income supports, and a means by which self-employed people can be insured against unemployment and sickness.”

Page 23

We will publish cost-benefit analyses for major infrastructure proposals and “tax expenditures” in advance of Government approval.

Page 35

The existing policy of co-location of private hospitals on public hospital lands will cease.  Tax incentives for private hospital developments will cease.

Page 56

We will enact legislation to amend tax and social welfare law in respect of civil partnerships.

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